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Purchasing cards charge ahead
Enhanced data and security features are driving growth
Tim Johnson
It wasn’t always so easy. In the past, Siemens Canada used an assortment of strategies to deal with low-dollar expenses such as travel, entertainment and office supplies. There were manual expense sheets; Diners Club was used to pay for flights, management carried an Amex card, and a Visa card paid for an assortment of other expenses.
The system was paper-dependant, and several administrative staff members had to manually input the data. Three years ago, Siemens set up a purchasing card program custom-designed by their card provider. Now, everyone takes care of their own reconciliation online.
“Previously, one person’s expenses might have gone through four different processes. Now managers can see all of those expenses on one sheet,” says Jeannette Wharton, team leader of the Visa program at Siemens. “It adds more visibility, too, and once they got used to it, most cardholders really liked it.”
Web access
Purchasing card programs have come a long way in the past decade, and growth has been impressive. A study released in March 2005 by the Boston-based Aberdeen Group, found expenditures managed by p-card programs had grown over the previous five years at a compounded rate of about 21 per cent.
A slightly more recent 2005 study by American academics Richard Palmer and Mahendra Gupta also found notable numbers: between 2003 and 2005, annual purchasing card spending in North America grew from US$80 billion to $110 billion. And the growth isn’t expected to stop: by 2010, purchasing card spending will increase to $185 billion, Palmer and Gupta predict.
The ability to integrate, automate and streamline has been a major drawing card for p-card programs, and the possibilities have only grown with advances in technology. “You can follow the life of a transaction all the way through,” says Paul Roman, director of business development for Amex Bank of Canada, based in Markham, Ont.
From controls on the front end, to management of the transaction, to the upload to the general ledger, pulling and analyzing management information, Roman notes, can now take place through a single, web-based portal.
And, of course, a more streamlined system with less paper means greater efficiency, ease and savings. Palmer and Gupta have tallied the savings in time and money and report that p-card use resulted in, on average, a 68 per cent reduction in procurement cycle time and annual transaction cost savings of more than $28 billion each year in North America.
Smaller companies
Bell Canada has one of Canada’s largest purchasing card programs. It fully embraced the available technology, carefully weeding out manual processes. “We have over 33,000 cards and hardly anyone is needed to manage the card program,” says Andre Blanchard, senior manager of expense management at Bell.
“When they’re integrated into your e-procurement platform and your ERP, then all of the labour-intensive stuff washes away and the computer takes over.” Blanchard warns that people are still needed on the back end to monitor and audit the data.
In earlier days, their sheer size and number of resources meant big companies like Bell were better equipped to put a p-card program in place. But now, purchasing card companies are adapting their tools to suit middle market and small businesses.
This is a good thing, because the benefits of a p-card program are equal for larger and smaller companies. Training is one good example. “Any good program has to have well-trained folks,” says Randy Ford, managing director of Bank of Montreal (BMO) Purchasing Solutions in Toronto. “Now, we can train people, virtually, on a database without physically being on site.”
Businesses, large and small, that use a purchasing card also have the benefit of a wealth of information at their fingertips. “If a senior manager is interested in having a bird’s eye view, those types of reports are available, all the way down to very detailed reports that an accounts payable person would be interested in seeing,” says Aviva Klein, a product manager in commercial solutions at Visa Canada in Toronto.
As suppliers continue to upgrade their systems, more precise information—known as level 3 data— is becoming increasingly available for purchasers. Level 3 data can provide GST and PST tax information, as well as very specific line-item detail info about purchases.
“Level 3 data enables someone in procurement to compare pricing, quantities and all those sorts of details that you don’t normally get,” says Brent Needham, a senior product manager in commercial solutions at Visa Canada.
Built in controls
For some, the idea of a disappearing paper trail, especially while employees march around with plastic in their pockets, may set off alarm bells. But there’s no need for fear, says Jeff Pikulik, director of procure-to-pay research at the Aberdeen Group and author of their authoritative p-card study.
Purchasing cards, with controls and liability mechanisms built-in, may actually be safer than paper-based programs, something that isn’t always recognized by business managers. “Once they’re educated that it’s a lower risk than they believe, usually they are then supportive of the solution,” says Pikulik.
There have been recent advances in the ability to customize controls at the front end, to the extent now that “you can say, ‘You can only buy from that [retailer] across the street from your main plant’,” Roman says.
Amex has launched a tool to allow companies to create and change specifications and controls in real time, online, he notes. On the back end, the data offered by p-card programs, and its increased availability via automation, also helps prevent potential problems.
“The reporting data that we get is extremely crucial for audit, risk and security,” says Andre Blanchard, noting Bell has a team in place to monitor the information coming in.
As for the future, experts foresee a wider array of goods and services being charged to p-cards, and even greater automation and integration. And that’s just what’s happening at Siemens Canada—the company is moving from a desktop system to a web-based one. “When it’s done on the web,” says Jeannette Wharton, “it’s just easier to maintain.”
With more sophisticated tools and better visibility, p-card proliferation will likely continue its upward trend. b2b
Tim Johnson is a Toronto-based freelance writer.
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